As I head towards the start of teaching management accounting next week, where I will cover costs extensively in the module, I started thinking about what it means for something to be a cost to me. Like the managers sitting in companies, breaking down and analysing their fixed costs and variable costs, I felt like I should also sit down and analyse another type of costs – my physical, mental and emotional costs. A key part of the internal decision making because resources are always limited …
In very simple terms: a fixed cost is a cost not related to level of activity; and a variable cost (as the name implies), varies depending on level of activity. Now that we have this simple explanation down (for non-finance persons reading), one can do a thought experiment …
We all use our body, mind (science does not really know the exact location, although the understanding is to place it as being in the brain) and emotions (again unknown location, although the tendency is to place it somewhere in the heart and gut region, and maybe brain, as emotions cause changes in brain chemical composition) … but of course as one working unit, there is an element of inter-connected-ness, as Vedic philosophy has been pointing out …
Every day we incur costs to our bodies (in the form of a brow wrinkle and shoulder knots); costs to our mind (in the form of an eight-lane-highway, full of ‘cars’ which happen to be carpooling – so multiple thoughts within one thought and then going eight ways … omg … thus, when a student comes to me feeling overwhelmed by all the things going on in his/her life, I often tell the student: ‘park some of these ‘cars’ in your ‘head’, and come back and attend to them later; and attend to what is critical right now’); and finally, can I say heart, to represent emotions (for poetic reasons). So heart, which goes to bed full of a variety of emotions (to dream them away hopefully).
Sometimes we incur these costs consciously and willingly, like in a meeting, in a project working group or at a party (if it turns out costly but you have to get through it). But sometimes we incur these costs unconsciously and unwillingly. It is the latter which we need to become aware of. And like I always tell my students, developing and nurturing self-awareness and doing it often, if not the whole day, is the most important activity to do throughout life. It is this self-awareness which we can use as a tool to understand how many costs we are incurring, if these costs are worth incurring, and if so, how we can manage them. And then of course there is the question of which of these are our fixed costs and which ones are variable costs, and how to make decisions! Essentially business is about managing costs so you can maximize profit … something tells me that brow wrinkle is a fixed cost …
Vind ik leuk
Over Kiran Aswani
Exploration of human nature has been a lifelong interest, and gathering the knowledge and deeper understanding of the world, a constant pursuit. Having lived on four continents and having been exposed to so many places and persons, I find myself even more curious, and with a heightened awareness. In Fontys, I teach finance and accounting in the International Business program. My blog is an exercise in critical thinking, looking at the intersection between finance-education-life.